The Hindu Business Line : DRS to form Rs 300-cr SPV with Kotak’s realty arm

Hyderabad, June 5 Eyeing the unfolding opportunities in 3PL (third party logistic) services, DRS group, the city-based logistics and warehousing solutions company, is forming a Rs 300-crore special purpose vehicle (SPV) with Kotak’s realty arm.

The mandate for the SPV would be to construct three million square feet of warehousing facilities across the country. “Kotak’s arm would have the majority stake in the SPV, while we take care of the operations,” Mr A.K. Agarwal, Director of DRS group, told Business Line.

Incidentally, Kotak Mahindra’s private equity fund had invested Rs 100 crore in DRS in March 2007 to fund the latter’s plan to develop 1.5 million sq ft of warehousing facilities to offer third party logistic services.

“We’ve already met the milestone of constructing 1.5 m sq ft. In fact, we crossed it by achieving 2 m sq ft. This includes 1 m sq ft in Delhi and 0.5 million in Hyderabad, involving investments of Rs 175 crore,” he said.

“Once the SPV is formalised, we will go for constructing three million sq ft warehousing space by the end of 2009. This will give us a total of 5 m sq ft of space for 3PL, making us the biggest player in that area,” he added.

Growing demand

Third party logistic services, according to Mr Agarwal, is in its nascent stages in India. “As against 80 per cent (80 out of every 100 companies outsource their warehousing needs) in the US and 62 per cent in the European Union, India registers only 8-9 per cent,” he observed.

With organised retailing growing fast, DRS expects the need for third party logistic services to increase in the next few years.

Another major opportunity it was looking at was the support these third party logistic services would generate by way of transporting goods to and from the warehouses. “We are going to add 600 more vehicles to take the fleet strength to 1,500. Also, we will go to 25 more cities to reach a number of 85 with 215 offices,” Mr Agarwal added.

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